Big Oil Pursues Carbon Storage Race in East Texas to Capitalize on Climate Incentives

In the pursuit of new underground resources, Texas is making a substantial wager, not on oil, but on carbon dioxide. Major players in the oil industry, such as Chevron, are embarking on ambitious ventures in East Texas and the Gulf of Mexico, drilling test wells in preparation for ventures into carbon capture and storage (CCS). Their primary motivation? The potential for significant profits, particularly in light of lucrative federal incentives.

Chevron, for instance, has initiated a carbon storage project covering an impressive 142,000 acres, with the capacity to store over 1 billion metric tons of CO2. This venture is strategically positioned to take advantage of the enhanced tax credit provided by the Inflation Reduction Act, which offers an enticing $85 per ton for carbon stored.

Joining Chevron in this race are other industry giants like Exxon Mobil and Occidental Petroleum, both of whom have commenced drilling activities around Houston. Their objective? To transform industrial emissions into a lucrative revenue stream, leveraging the burgeoning interest and incentives in the carbon capture and storage sector.

The Texas General Land Office (GLO) is also actively involved in expanding the scope of this industry into the Gulf region. By auctioning off substantial portions of seabed for CCS purposes, the GLO aims to foster further growth and investment in this promising sector. Talos Energy, for instance, secured a lease from the state for a 40,000-acre area near Port Arthur, with additional leases expected to generate around $130 million in revenue earmarked for Texas schools.

While advocates of CCS view it as a critical component of the United States' journey towards achieving net-zero emissions, critics raise valid concerns regarding the technology's efficacy and associated environmental risks. One prevalent concern is the uncertainty surrounding the longevity of carbon storage underground. Critics argue that the efficacy of CCS may not meet the lofty expectations touted by proponents, and there are lingering uncertainties regarding the duration for which carbon can effectively remain sequestered underground.

A notable example cited by critics is the Petra Nova facility, which stands as the sole CCS project ever to have been implemented at a U.S. power plant. The Institute for Energy Economics and Financial Analysis uncovered discrepancies in the carbon capture performance of the Petra Nova facility, revealing that it was capturing less carbon than originally claimed. Furthermore, in 2020, the facility was forced to shut down due to the sharp decline in oil prices, underscoring the economic vulnerabilities inherent in CCS ventures.